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Blog de ÀLEX PLANA PALUZIE
[Between laws & precedents] The purpose of this blog is to analize the legal system of Catalonia, Spain and Europe. It focuses mainly on business law and, in particular, corporate and mergers and acquisitions (M&A). It also addresses issues about economics, marketing, politics, current affairs and other legal systems different to the aforementioned.

Proposals for a EU regulatory framework for crowdfunding and peer to peer finance

The
European Union (EU), with regard to its aim to establish a Capital Market Union
(CMU), has initiated, through the European Commission, a legislative proposal
for the regulation of two very relevant issues of the EU, which are
crowdfunding and crowdlending (in Spain known as plataformas de financiación
participativa), and also peer to peer finance, which is a wider term that
includes crowdlending and other financing platforms.

In Spain
there is already a specific regulation for crowdfunding and crowdlending, while
the peer to peer finance referred to other kind of platforms, such as promissory
note and invoice discounting between individuals and non-financial entities, do
not have a specific regulation, but continues to be regulated and
overseenby the Bank of Spain.
However, in Spain peer to peer finance companies can outsource a payment entity
authorized by the Bank of Spain, avoiding its requirement of authorization to operate
as a payments entity.

This
initiative will be developed over the next year 2018, and will face significant
challenges, because each member state is regulating this subject with different
approaches. Due to this situation, it was expected that the EU would try to
establish a common framework to harmonize the regulations emerging, and also
ensure the companies operating in this field may have the chance to work across
all the EU. Due to the absence of this harmonization, at this moment
crowdfunding and peer to peer finance companies are very focused on a national
level.

During four
weeks any interested party can submit comments. For this purpose you can visit this
Link.

The
European Commission has identified four alternatives on how to approach the
regulation of crowdfunding and peer to peer finance:

Not
legislating: Although the initiative clearly shows that this approach is not
desirable, especially because it harms companies’ growth and the CMU, it is
considered a possible alternative to be taken into account. In this sense, each
member state would be able to regulate crowdfunding and peer to peer finance at
its sole discretion. Therefore, the Commission would act as a mere mediator and
supervisor, with the purpose to promote the harmonization of the national
legislations. I think this alternative would be an error.

Self-regulation
with minimum EU standards: In this case, the Commission would conduct a study
of the measures implemented throughout the EU, identify the measures it
considers most appropriate and prepare a non-binding recommendations on good
practices. Therefore, it responds to the not legislating alternative, but with
the aim to create a reputational EU framework for Fintech.

Harmonization
of regulations in the EU: In this case, the EU would create a single regulatory
framework, in which crowdfunding platforms would be considered as regulated
markets or payment entities. Therefore, companies engaged in these activities
would require a prior license from the EU to operate. In addition, this
alternative includes a second way, consisting of a minimum EU framework.
Nowadays this alternative is still viable, however, over time its
implementation will be more complicated to be completed.

EU
regulations only applicable to cross-border transactions: The last and fourth
alternative identified is referred to maintaining the national legislation of
each member state, applicable only to companies operating on a national level.
However, in case of cross-border aspects involved, national legislation would be
left out and the opt-in by the company to the EU regulations would be required.
Therefore, each company could decide if opt-in the EU laws, acquiring the
license to operate throughout the EU CMU or, stay limited to the national
level, in which case the national legislation would apply to it, excluding the
EU rules on crowdfunding and peer to peer finance.

Corporate and Mergers and Acquisitions (M&A) Lawyer at AGM Abogados, S.L.P. (Barcelona Bar Association - ICAB). Degree in Law awarded by Pompeu Fabra University (UPF), Master of Laws with honors at the Instituto Superior de Derecho y Economía (ISDE) and Master in International Business Law at ESADE. My main areas of practice are: M&A, corporate, venture capital, private equity, restructuring, and banking and finance. For more information and contact me click on my name. You can also find me on LinkedIn.

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Corporate and Mergers and Acquisitions (M&A) Lawyer at AGM Abogados, S.L.P. (Barcelona Bar Association - ICAB). Degree in Law awarded by Pompeu Fabra University (UPF), Master of Laws with honors at the Instituto Superior de Derecho y Economía (ISDE) and Master in International Business Law at ESADE. My main areas of practice are: M&A, corporate, venture capital, private equity, restructuring, and banking and finance. For more information and contact me click on my name. You can also find me on LinkedIn.